Origination

Great Florida Bank, Coral Gables, Fla., has announced an expansion of its residential lending division with the hiring of three new managing directors. The new directors are Chris Buttafuoco, Todd Roderiquez, and Ed Wilburn, all of whom were previously managing partners at Capital Mortgage LLC. Mr. Roderiquez was also that company's chief financial officer. The expansion of Great Florida's residential lending will also bring the addition of new programs to the bank's product lineup, including fixed- and adjustable-rate first-lien conforming loans, Federal Housing Administration loans, and other loans designed for low- and moderate-income borrowers, the bank said. The bank can be found on the Web at http://www.greatfloridabank.com.

Hope Now servicers completed nearly 522,000 loan workouts in the second quarter, up 8% from the level recorded in the first quarter, as loan modifications jumped 30%. Loan modifications for subprime loans jumped from 122,100 in the first quarter to 164,200 in the second quarter, while loan-mods for prime mortgages rose from 48,100 to 55,100 over the same period. Meanwhile, 301,900 troubled borrowers ended up in repayment plans. Workouts involving loan modifications and repayment plans are "far greater than the actual foreclosures taking place in the market," Hope Now executive director Faith Schwartz told reporters. Servicers closely monitor loans that start the foreclosure process, and "we work aggressively to avoid those foreclosures," she said. Hope Now data show that sales of foreclosed properties have jumped dramatically since the fourth quarter and totaled nearly 245,700 in the second quarter. Sales of foreclosed properties resulting from subprime defaults totaled 138,000 in the second quarter, up 34% since the fourth quarter. Sales of foreclosed prime loan properties totaled 107,700, up 45% from the fourth-quarter level.

Ideal Mortgage Bankers Ltd., Melville, N.Y., is exiting its wholesale lending business, which operates under the name Ideal Mortgage, to concentrate on expanding Lend America, its retail lending platform. The company specializes in doing Federal Housing Administration products. "After conducting an extensive review of our wholesale operations and taking into consideration the inherent risk in the current environment and the direction of the mortgage industry, we have decided to exit the wholesale lending business after approximately a year in operation," said Michael Ashley, chief business strategist. "Our core competency has historically been as a direct-to-consumer retail lender, which is validated by the enormous success over the last two years of Lend America, our rapidly growing retail platform." Job losses as a result of the closing will be limited to outside account executives, Ideal said. Many employees will be redeployed within Lend America. Ideal said it will accept submissions until July 31, and will honor all commitments and close its wholesale pipeline in the normal course of business. The company can be found online at https://www.idealmb.com.

Twenty-seven classes of notes issued by five collateralized debt obligations linked to subprime residential mortgage-backed securities have been downgraded by Fitch Ratings. The affected securities include six classes from Jupiter High-Grade CDO II Ltd./Inc., a cash CDO; six classes of notes from ACA ABS 2003-1 Ltd. and six from ACA ABS 2003-2 Ltd., both cash flow structured finance CDOs; and five classes of notes from GSC ABS CDO 2005-1 Ltd. and four from GSC ABS CDO 2006-1c Ltd., both hybrid CDOs. The downgrades were attributed to "significant collateral deterioration" in the portfolios' subprime RMBS as well as (in the Jupiter and GSC ABS 2005-1 CDOs) structured finance CDOs with underlying exposure to subprime RMBS and (in the Jupiter CDO) alternative-A RMBS with underlying exposure to subprime RMBS. Fitch can be found online at http://www.fitchratings.com.

Taylor Capital Group Inc., Rosemont, Ill., has reported a net loss of $25.3 million ($2.42 per share) for the second quarter, primarily as a result of a $49.4 million provision for largely construction-related loan losses. Taylor Capital, the holding company for Cole Taylor Bank, reported net income of $7.2 million ($0.65 per share) a year earlier. "The unprecedented downturn in the residential real estate market continued into the second quarter, significantly eroding the value of the collateral supporting loans to some of our Chicago-area homebuilder clients," said Bruce W. Taylor, chairman of Taylor Capital.

Corus Bankshares Inc., a Chicago-based construction lender, has reported a net loss of $16.2 million ($0.30 per share) for the second quarter, its first-ever quarterly loss. The company reported net income of $42.4 million ($0.74 per share) in the second quarter of 2007. Corus said the housing slump and the company's focus on condominium construction lending have resulted in "significant increases" in nonaccrual loans and loan loss provisions. "Credit quality issues, the driver behind the company's moves to increase its loan loss reserves, resulted in substantial increases in nonperforming loans, with nonaccrual commercial real estate loans growing to $830 million at June 30, 2008, up from $420 million at March 31, 2008, and $201 million at June 30, 2007," said Robert J. Glickman, president and chief executive officer of Corus. Mr. Glickman said the company is "seeing new opportunities in the office, apartment, and hotel markets," where it expects to see "a considerable portion of our near-term originations." He said Corus is "not contemplating any major changes" in its business model.

Scott Syphax, president and chief executive of The Nehemiah Corporation of America, Sacramento, Calif., has called on President Bush to save the controversial seller-funded downpayment assistance program that would be banned by the housing bill he is expected to sign into law. The elimination of DPA programs "will negatively impact generations to come," Nehemiah said. Mr. Syphax stressed in his letter that what is being ignored is that "seller-funded downpayment assistance is the only remaining safety net available to millions of families today seeking home ownership." The Department of Housing and Urban Development "has spent more than 10 years fighting to shut us down rather than work with us to determine how to improve a downpayment assistance program that has helped more than 1,000,000 American families," he wrote.

The second half of 2007 showed the mortgage originations market moving even more heavily toward a fixed-rate, prime-credit business, according to the latest Mortgage Bankers Association Mortgage Originations Survey. "Long-term rates declined substantially in the second half of 2007," the report said. "At the same time, the spread between the [adjustable-rate mortgage] and fixed mortgage rates narrowed. As a result, the demand for fixed-rate mortgage products increased." For first mortgages, fixed-rate loans (excluding interest-only loans) accounted for 63.6% of loans by dollar volume in the second half of 2007, compared with 53.4% in the first half of 2007, according to the MBA survey. By number of loans originated, 77.8% were fixed-rate loans. In the second half of 2007, 79.0% of all origination dollars went for prime loans, compared with 70.0% in the first half of 2007. Subprime production made up 7.5%, compared with 10.4% in the first half of 2007, while alternative-A loans constituted 7.8%, compared with 15.8% in the first half of 2007, the MBA said. The share of government loans produced rose from 3.8% in the first half of 2007 to 5.7% in the second half. Refinancings constituted 54.8% of production in the second half of 2007, virtually unchanged from the level recorded in the first half. The MBA can be found online at http://www.mortgagebankers.org.

Hoping to revive the private-label mortgage-backed securities market, the Treasury Department on Monday issued a best- practices guide aimed at underwriters that are interested in issuing "covered bonds" backed by nonconforming loans. "The private-label market is severely constrained," said Treasury Secretary Henry Paulson at a news conference. "Fannie Mae and Freddie Mac are funding more than 70% of all mortgages today." A covered bond is a debt instrument backed by a specific pool of mortgages. The underlying collateral is held on the balance sheet of the institution issuing the security. Mr. Paulson called covered bonds a "new funding source" for nonagency loans and said he is hoping the Treasury's guidance will create "greater risk awareness and investor discipline." He said his agency is looking to support the nascent market for covered (housing) bonds, and noted that four major banks -- Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo -- are creating covered-bond programs for mortgages [see item below]. Capital Research and Management of Los Angeles, an investment adviser, said, "We expect the covered-bond initiative will provide an important new source of long-term funding in the mortgage market. We also believe that the Treasury Department's best-practices guide, especially its requirement for high-quality collateral, will provide the structure needed for the covered-bond market to develop over time."

Merrill Lynch has planned a series of moves to improve its capital position, including the sale of problematic mortgage-related collateralized debt obligations (with a gross notional value of $30.6 billion) for $6.7 billion. An affiliate of private equity firm Lone Star, which has held investments in two surviving subprime firms, has agreed to buy the super-senior asset-backed security CDOs involved in the sale. Merrill said the ABS CDOs were carried at $11.1 billion at the end of the second quarter. The company said it expects to take a third-quarter pretax writedown of about $4.4 billion as a result of the deal, which chairman John Thain said is a "significant milestone" in Merrill's risk reduction efforts. Other moves the firm is making to improve its capital position include the termination of ABS CDO hedges with a monoline guarantor and settlement negotiations with other monoline counterparties that are expected to result in a maximum loss of $1.3 billion. The Wall Street firm is also issuing new common shares with gross proceeds of approximately $8.5 billion through a public offering in which Singapore investment house Temasek Holdings has agreed to purchase about $3.4 billion in common stock. Merrill Lynch can be found online at http://www.ml.com.